Nest Labs Inc. has apparently bought itself some time in its patent fight with Honeywell International Inc. and this month rolled out a new version of the “smart thermostat” at the center of the dispute.

Richard Lutton, general counsel at the Palo Alto startup, said on Oct. 2 that the U.S. Patent and Trademark Office rejected claims on six of seven patents that Honeywell said Nest is violating. He said he expects a similar ruling on the seventh, which deals with controlling temperatures based on utility company rates and other settings, within weeks.

“We feel that these patents should not have been granted in the first place, as we said in our response to Honeywell’s lawsuit,” Lutton said.

Nest asked regulators to re-examine the seven patents in July in a move that Honeywell dismissed as common and inconclusive.

“A majority of patents that are challenged via the re-examination process are initially accepted by the Patent Office — and a majority of those re-examined are affirmed as valid,” Honeywell said in a prepared statement, saying it stands by its claims of patent infringement. “We are confident the Patent Office will affirm the validity of our patented intellectual property related to thermostat technology.”

The judge in the patent case filed in February stayed the trial pending the re-examination, which Honeywell and others say could take up to two years to resolve.

More challenges?

Regardless of which way the Patent Office rules, legal experts say that more litigation is likely. If the Patent Office overturns the patents, Honeywell could take that decision to court and it doesn’t mean the original case won’t go forward.

“There is a debate about whether to ask for re-examination in patent disputes,” said Santa Clara University School of Law professor Brian Love. “Some patent defense lawyers prefer never to do it at all.”

The reason for that, Love said, is that the patent holder could come back with a narrower definition for their intellectual property that the patent office upholds. “What you could end up with as a result of re-examination is a stronger patent when the case gets to trial.”

Lutton, who worked as Apple Inc.’s patent legal chief before joining Nest, said he has asked for patent re-examination before in order to clear the air in a dispute.

“I feel the patent office takes re-examination very seriously, it’s a good process to turn to and it’s a cost-effective response to patent litigation,” Lutton said. “Patent litigation once it gets to court is extremely expensive, lengthy and fraught with concerns about the outcome all along the way.”

Moving forward

Whatever the outcome of the patent re-examination, Nest is busily building its business, unveiling a second version of its $249 smart thermostat on Oct. 2. The new version is thinner and can take advantage of more advanced cooling and heating options that more affluent home owners are using.

The new thermostats are available online through Nest, Amazon.com or Apple Inc. and in Lowe’s Home Improvement stores.

Nest co-founder Tony Faddell, who helped to shape the iPod and iPhone while at Apple, said the new device hits a high end of the market that the original smart thermostat didn’t work in. Like the original, it can be controlled through a smartphone, tablet or Web browser.

In addition to its Apple connections, Nest has a powerful list of investors in its court as well, including Google Ventures, Kleiner Perkins Caufield & Byers, Intertrust, Lightspeed Venture Partners, Shasta Ventures and former Vice President Al Gore.